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Commentary By Jared Meyer, Conner Dwinell

Walberg Trumps Obama On Licensing Reform

Economics Regulatory Policy

This article is coauthored with Conner Dwinell.

Last month, the White House issued a statement regarding its recent attempts to push occupational licensing reform. As part of President Obama’s “middle class economics” agenda, the release states that “the Department of Labor is announcing $7.5 million (sic) for organizations to work with groups of states to design and implement approaches that enhance the portability of licenses across states and reduce overly burdensome licensing restrictions in general.”

Contrary to some of President Obama’s other policies intended to “help the middle class,” the new focus on occupational licensing is a productive one , although it comes with additional federal spending. Thankfully, a new effort in Congress could have the same effect with no new costs.

As important as it is to reform occupational licensing, President Obama’s $7.5 million price tag may make fiscal conservatives slightly hesitant. Congressman Tim Walberg’s (R-MI) recent amendment to the Strengthening Career and Technical Education for the 21st Century Act addresses this critique.

Rep. Walberg’s amendment changes the language of the existing, bipartisan appropriation of discretionary funds for technical education to state governors, allowing governors to use this money for the “identification, consolidation, or elimination of licenses or certifications which pose an unnecessary barrier to entry for aspiring workers and provide limited consumer protection.” In other words, the fraction of the state-granted funds that go to governors for discretionary spending can now be used to eliminate or reduce burdensome licensing requirements. This approach appropriates existing funds to occupational licensing reform rather than spending more money on a new federal program.

Occupational licensing is essentially a permission slip from the government to hold a specific job . Public safety concerns are often emphasized in arguments for occupational licensing, in part because modern licensing schemes were meant to protect people from fraudulent doctors and lawyers. But occupational licensing covers far more professions than those in the medical and legal fields.

The Bureau of Labor Statistics released data in 2015 that shows 25.5 percent of employed people in the United States need some kind of government license to work. Estimates from University of Minnesota economist Morris Kleiner and Princeton University economist Alan Krueger place this figure closer to 30 percent, a great change from the less than five percent the United States saw during the 1950s. Such a drastic change did not come from increased concerns about “safety.”

The real problem with occupational licensing is the scope of professions it covers. A thorough study by the Institute for Justice titled “License to Work” highlights the various low- and median-income jobs affected by occupational licensing and the time and financial costs associated with getting a government license. From the 102 occupations studied, IJ found that on average workers were expected to pay $209 in fees, take one exam, and receive approximately nine months of training. For jobs such as interior design and African hair braiding that do not directly affect public health and are only licensed in a handful of states, making workers jump through unnecessary hoops to work is indefensible.

Even for occupations such as cosmetologists, skin care specialists, barbers, and manicurists, which all require licenses in every state, the amount of time required to work in these occupations varies drastically. For example, although ten states require four months or more of training for manicurists, Alaska demands only three days and Iowa nine days. If protecting public safety was truly the main concern, there would be no justification for this large variation.

Many of the jobs requiring licensing are typically low-income, meaning that government regulations of these industries effectively price individuals out of the labor market. If the opportunity cost is hundreds of dollars and months of individuals’ time, it often makes more sense for them to enter another profession or not enter the labor force at all.

Occupational licensing also harms entrepreneurship since it makes it difficult for many workers to realize their dreams of eventually owning small businesses. As a new occupational licensing study by the Brookings Institution’s Hamilton Project makes clear, the tremendous costs of occupational licensing are rarely justified by the claimed benefits.

Part of the reason for the new focus on occupational licensing at the state level is that many states do not have the same or transferable licensing requirements. Licenses are not usually valid in other states, making it incredibly difficult for licensed individuals to enjoy occupational mobility. This effect is especially pronounced for those who move frequently, such as those whose family members are in the military. The fees and training associated with obtaining a new license are often too high for people who move to new states for work opportunities.

On the importance of providing governors with permission to use existing federal funds to combat out-of-control licensing schemes, Rep. Walberg told us, “If our goal is to create pathways to meaningful careers, we should encourage states to conduct occupational licensing reviews and ensure these regulations promote opportunity and foster a regulatory climate that does not hinder entrepreneurship and jobs for a healthy economy.” We could not agree more.

This article originally appeared in Forbes.

Jared Meyer is a fellow at the Manhattan Institute for Policy Research. Conner Dwinell is a contributor to E21. Follow Jared and Conner on Twitter.

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